The Japanese Self-Defense Forces were on a high state of alert on September 9 ahead of the first anniversary of Japan’s controversial purchase of islets in the disputed Senkaku/Diaoyu archipelago, particularly after a pair of Chinese bombers flew near Okinawa the previous day.

Japanese Defense Minister Itsunori Onodera has ordered military personnel to strengthen their surveillance around the Senkakus, which are also claimed by China and Taiwan. A source in the Japanese government indicated that the People’s Liberation Army (PLA) and Chinese maritime enforcement could take “outstanding” action in the area on September 11, the first anniversary of the purchase.

The “nationalization” of three of the five islets comprising the Senkakus in 2012 sparked large-scale protests across China, which also claims ownership of the oil- and natural-gas-rich area. Beijing retaliated against Japan’s attempted nationalization of the islets by increasing the frequency of naval patrols in the area, raising fears of accidental clashes and escalation.

Meanwhile, the Japanese Defense Ministry confirmed in a statement that it had scrambled fighter aircraft on September 8 to shadow two Chinese Xian H-6 bombers that were observed between the main island of southern Okinawa and Miyakojima, an area that Chinese vessels have often used to transit into the Pacific Ocean to conduct exercises. The bombers reportedly did not violate Japanese airspace.>> Read More

Brussels said it will “urgently review” relations with Egypt following an escalation in violence over the past week that has left EU leaders increasingly worried about the future of peace and stability in the Arab world.

EU officials said that the review was likely to recommend a suspension of various forms of aid and loans in total worth €5bn, which had been earmarked to help Egypt in its transition towards democracy following the popular revolution that ended the military regime of Hosni Mubarak two years ago. Suspension would require the backing of EU member states.

Herman Van Rompuy, president of the European Council, and José Manuel Barroso, head of the European Commission, called for an end to clashes between security forces and supporters of the ousted president Mohamed Morsi in which several hundred people have died.

“The EU will remain firmly engaged in efforts to promote an end to violence, resumption of political dialogue and return to a democratic process. To this effect, together with its member states, the EU will urgently review in the coming days its relations with Egypt and adopt measures aimed at pursuing these goals,” the two EU leaders said in a statement.>> Read More

The US authorities are reported to be preparing to file criminal fraud charges against Javier Martin-Artajo, a Spanish-born former JP Morgan manager, and Julien Grout, another former employee of the US bank, according to The New York Times.

Prosecutors in the US are said to be ready to file charges against the two men within days, which are likely to lead to a lengthy extradition process as both men are reported to be living in London.

The charges would mark a dramatic escalation in the wake of the revelation last year that JP Morgan traders working in the London arm of the bank’s chief investment office had racked up billions of dollars of losses betting on the debt of large US companies.>> Read More

Two days ago we reported that the most recent escalation in the Syrian proxy war involved a bitter exchange between Russia and Israel, where the latter warned the former that it would proceed with destroying any arms shipments from Russia into Syria, specifically referencing the S-300 missiles that has been known to be en route to Damascus for several weeks now. The Israel defense minister warned that: “The shipments haven’t set out yet and I hope they won’t. If they do arrive in Syria, God forbid, we’ll know what to do.” Well, according to Lebanese newspaper al-Akhbar not only has the shipment been sent out, but it has already arrived. Check to Israel and coming through on its warning to begin an offensive action not only against Syria, but more importantly, implicitly against Russia.

More:

“Syria has received the first shipment of Russian anti-aircraft S-300 rockets,” Lebanese newspaper al-Akhbar newspaper quoted Assad as saying in an interview due to be broadcast later on Thursday.>> Read More

Now that is a rattling sabre. While markets for now are seemingly shrugging off this ‘fly-by’, we suspect the people of Okinawa were more than a little surprised:

NORTH KOREA LAUNCHED ROCKET AT 9:51 AM LOCAL TIME: YONHAP

N. KOREA ROCKET LAUNCHED IN SOUTHERLY DIRECTION,JAPAN GOVT SAYS

N. KOREA ROCKET PASSES OVER JAPAN’S OKINAWA, NHK SAYS

JAPAN GOVT: NO ORDER GIVEN TO SHOOT DOWN N.KOREA ROCKET

N. KOREA ROCKET EXPECTED TO FALL IN SEA EAST OF PHILIPPINES:NHK

What is most surprising is not the rocket launch: it was largely expected and overdue after the humiliation from the last one; it is that Korea has brazenly defied US warnings and the threat of sanctions just to make a rather meaningless political point. The imminent escalation in sanctions and N.Korea’s response is what is the true variable here, confirmed by the markets who have not even blinked as a result of the rocket launch.>> Read More

-The battle is on for delivery and verification for official gold accounts -Evidence grows that much of it is gone, and when demanded, replaced with urgency -It is soon to transform into a global gold war -The German Govt gold demand to the London and NY City bankers represents a big escalation in the gold war -The central bank coordinated QE to Infinity has brought questions of gold account location and integrity -The Allocated Gold Account scandal is a natural event to follow the LIBOR banker scandal -QE3 will assure a gold rise past the $2000 mark, but the new scandal will take the gold price to $5000 -The powerful gold factors are aligned and in place, led by permanent ZIRP and unlimited QE

Escalation. The inevitable collapse of the Prisoner’s Dilemma that kept the LIBOR contributors together is occurring rapidly. After Barclays’ forced admission and initial fine, the ‘he-who-defects-first-wins’ strategy has been trumped by Deutsche Bank as they turn all ‘Donnie Brasco’ on their oligopolistic peers. As Reuters reports this morning “The bank last year obtained the status of being a witness for the prosecution in the EU and in Switzerland,” and “as a result of that, the bank could get a lighter penalty if a punishment is imposed,” though of course this does not mean they are admitting guilt (sigh). Under the leniency programs of the EU, companies may get total immunity from fines or a reduction of fines which the anti-trust authorities would have otherwise imposed on them if they hand over evidence on anti-competitive agreements or those involved in a concerted practice. How quickly the worm turns when trust leaves the system – the warning the rest of the Liebor contributors – be afraid, be very afraid.

The European Central Bank may cut interest rates again soon as the eurozone debt crisis deepens, but it will continue to insist that it is up to governments to find a lasting solution, analysts say.

ECB watchers predict the central bank — which will hold its regular policy-setting meeting next week on Wednesday instead of Thursday owing to a public holiday — will not alter borrowing costs just yet this month.

But it could act in July as deepening fears about Greece and possible contagion to other countries push the 17 countries that share the euro back into recession, the analysts predicted.

“The further escalation of the eurozone crisis has intensified the pressure on the ECB to take further remedial action,” said Capital Economics’ chief European economist Jonathan Loynes.

“But while president (Mario) Draghi may hold open the prospect of further support of the region’s banks after the meeting on June 6, he is likely to insist again that it is up to national policymakers to address their broader economic and fiscal problems,” Loynes said.

The ECB has never hesitated to act from the very beginning of the crisis.>> Read More

A few days ago, before the latest breakout in crude sent Brent to all time highs in GBP and EUR (and Asian Tapis in USD just shy of all time highs), we said that “we hope our readers stocked up on gasoline. Because things are about to get uglier. And by that we mean more expensive. But courtesy of hedonic adjustments, more expensive means cheaper, at least to the US government.” This was due to recent news out of Iran “where on one hand we learn that IAEA just pronounced Iran nuclear talks a failure (this is bad), and on the other Press TV reports that the Iran army just started a 4 day air defense exercise in a 190,000 square kilometer area in southern Iran (this is just as bad). The escalation “ball” is now in the Western court.” We were not surprised to learn that the “Western court” has responded in precisely the way we had expected. The WSJ reports: “The Pentagon is beefing up U.S. sea- and land-based defenses in the Persian Gulf to counter any attempt by Iran to close the Strait of Hormuz. The U.S. military has notified Congress of plans to preposition new mine-detection and clearing equipment and expand surveillance capabilities in and around the strait… The military also wants to quickly modify weapons systems on ships so they could be used against Iranian fast-attack boats, as well as shore-launched cruise missiles” Which means the escalation slider was just shifted up by one more level, as Iran will next do just what every actor caught in an Always Defect regime as part of an iterated prisoners’ dilemma always does – step up the rhetoric even more, as backing off at this point is impossible. Which means that crude will go that much more higher in the coming days, as now even the MSM is starting to grasp the obvious - from the Guardian: “The drumbeat of war with Iran grows steadily more intense. Each day brings more defiant rhetoric from Tehran, another failed UN nuclear inspection, reports of western military preparations, an assassination, a missile test, or a dire warning that, once again, the world is sliding towards catastrophe. If this all feels familiar, that’s because it is. For Iran, read Iraq in the countdown to the 2003 invasion.” And the most ironic thing is that the biggest loser out of all this, at least in the short-term is…. Greece.

As a reminder, here is an update of US naval assets, courtesy of a recently up and running Stratfor:

More on the latest very much anticipated defection from the US in what is setting up to be either the biggest dud of geopolitical foreplay in history, or potentially the start of a new World War (because the Muslim cresent will not take too lightly to any joint or standalone US/Israeli aggression).>> Read More

Crude Oil Clock (In Barrels)

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